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Jaguar Mining, Inc. (JAG)

Q3 2012 Earnings Call

November 13, 2012 10:00 AM ET


Roger Hendriksen – VP, IR

David Petroff – President and CEO

Fred Hermann – Director

Jim Roller – CFO and Treasurer


John Bridges – JP Morgan

Eric Opal – Glass Capital Management

David Epstein – CRT Capital

Anna Povinelli – Bristol Investment Partners

Fabio Zamith – CarVal Investors



Good morning everyone, and welcome to the Jaguar Mining Third Quarter 2012 Financial Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. Please also note that today’s event is being recorded.

I would now like to turn your conference call over to Mr. Roger Hendriksen, Vice President of Investor Relations. Sir, you may begin.

Roger Hendriksen

Thank you, Jamie. Good morning, everyone. Thanks for taking the time to participate in our call this morning. We appreciate your continuing interest in Jaguar Mining.

As you know, we distributed our third quarter earnings release last evening and filed our Q3 2012 financial package as well. If any of you have not had a chance to view these materials, they are available through the Investor Relations page of our website and on SEDAR and EDGAR. The members of our management team, who are participating on the call this morning, are David Petroff, President and Chief Executive Officer; and Fred Hermann, member of our Board of Directors who is currently focused on the turnaround of our operations. Jim Roller, our Chief Financial Officer is also on the call and we’ll be available to answer your questions during Q&A.

Before we begin, I need to remind you that the statements made in this presentation, which are not historical in nature, are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current factual information and certain assumptions, which management currently believes to be reasonable.

Financial and operational results for future periods may differ materially from current management projections as a result of factors outside the company’s control. Information concerning those factors is available on the company’s Annual Report and other periodic public filings on SEDAR and EDGAR.

With those formalities out of the way, I’ll now turn the call over David.

David Petroff

Good day everyone. And thank you for joining us. I trust that you’ve all seen and read our third quarter results and while we continue to make progress in bringing our cost down, overall I believe the operational and financial results can be greatly improved. I’m sure that we are turning the corner for the better and we will provide you with some detail on this in a few minutes.

In our presentation this morning, I intend to confine my comments to the overall short-term strategy that I envisioned for the company going forward. I’ve asked Fred Hermann, a member of our Board of Directors who’s very experienced and capable on the operational front, to comment on the turnaround of the mines.

As we consider what will be the best short-term strategy for Jaguar, we can begin with three key facts. Jaguar has a solid base of three producing underground mines. It has excellent potential to increase reserves and resources at the existing operations. And Jaguar has a broad portfolio of quality properties and resources that represent excellent growth potential. In short, Jaguar’s future potential is bright.

In the recent past, the company has lacked the CEO, struggled with its producing assets and experienced a significant cash outflow. In contrast, today, there is executive leadership in place, a plan to solidly improve the operations and measures taken to strengthen the financial profile. With the implementation of this plan the mine’s challenges are being addressed and with time improvements will flow to the financial results.

While we are making progress, the implementation of the turnaround plan will still take several more quarters to complete. And we needed to ensure that we have sufficient funds to stay the course, to allow for the duration of operational improvements. And that is the genesis of pursuing a $30 million line of credit. Renvest was the most reasonable and flexible option of the many that we considered and therefore we signed a term sheet with them.

We are currently in the process of completing documentation and providing security. We expect the facility to be in place by year-end. And we intend to make an initial drawdown of $5 million on closing. Thereafter, we intend to use it as a safety net and minimize drawdowns to the greatest extent possible.

Our short-term strategy continue to focus on improving our operational results. Also our near-term strategy calls for instituting tighter measures to manage our financial situation including enforcing robust controls on procurements and warehousing, proactively managing our working capital, protecting our foreign exchange financial exposure within our modest means and temporarily slowing our investment directed at our growth opportunities.

As we begin to generate positive free cash flow, which is after capital, after debt service, and after our overhead costs we will initially invest in additional equipment to increase the underground activities in production. Only when we are operationally stable, will we increase our investments to fund the growth opportunities.

Going forward on this basis we anticipate to finish the year with total production of 100,000 ounces to 110,000 ounces and an average per ounce cash cost of $1,050 to $1,150. I want to reiterate that we have plenty of upside, which includes the restart Paciência, Gurupi development, Pedro Broncho exploration and Brownfield exploration.

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